Bank of America tops expectations on better credit quality

Thu Apr 19, 2012 12:41pm EDT
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By Rick Rothacker

(Reuters) - Bank of America Corp posted a better-than-expected first-quarter earnings on Thursday as the No. 2 U.S. bank set aside less money for loan losses and capital markets activity rebounded.

The bank, like rivals including JPMorgan Chase & Co and Citigroup Inc, benefited from signs of strength in the U.S. economy and more activity in the capital markets as fears about the European debt crisis eased.

The results showed Bank of America making further progress in recovering from mortgage-related losses it racked up during the financial crisis. Executives said the bank was building capital faster than expected and raised their outlook for year-end capital measures required under new international standards.

Bank of America said its first-quarter provision for expected losses from bad loans fell to the lowest level since the third quarter of 2007. Sales and trading revenue, excluding an accounting charge, was the highest since the 2008 acquisition of Merrill Lynch.

"In general, it shows nice improvement across the board," said Joe Terril, president of Terril & Co. "I think the thing I am most pleased with just at first glance is continued improvement in the loan portfolio."

Bank of America shares rose as high as $9.16 in early trading on the New York Stock Exchange but then fell back. They were up 5 cents to $8.97 at mid-morning.

The shares are up 60 percent this year after falling 58 percent in 2011. The bank passed the Federal Reserve's latest stress test in March, shifting investor concerns from its capital needs to its ability to increase earnings in a time of low interest rates and increased regulation.

Separately on Thursday, Morgan Stanley also reported better-than-expected results, helped by strong trading revenue.   Continued...

Pedestrians walk past a Bank of America ATM in Charlotte, North Carolina April 18, 2012. REUTERS/Chris Keane